China Wind Systems, Inc. News
China Wind Systems, Inc. Reports First Quarter 2008 Results
WUXI,
First Quarter 2008 Highlights — Net revenues increased 104.6% year-over-year to $8.4 million — Gross profit increased 103.8% year-over-year to $2.2 million — Net loss allocable to common shareholders, after a $2.9 million non-cash deemed preferred dividend, totaled $(4.1) million, or $(0.11) per diluted share — Adjusting for non-cash items such as interest expense of $2.3 million and a deemed preferred dividend of $2.9 million, non- GAAP net income was $1.0 million, or $0.03 per diluted share. — Revenue from the forging of rolled rings, for the wind power and other industries grew from $0 in the March Quarter of 2007 to $3.2 million in the March Quarter of 2008.
"Last quarter we made progress in executing our long term strategy, which is to expand our products to offer products and services for the wind power industry. During 2007, we began to generate revenue from the forging of rolled rings, for the wind power and other industries. These activities accounted for
First Quarter 2008 Results
Total revenue for the first quarter of 2008 totaled
Gross profit for the first quarter of 2008 was
Operating expenses were
Operating income for the first quarter of 2008 totaled
Net loss, including non-cash items such as interest expense related to amortization of debt discount of
Financial Condition
As of
Business Outlook
"In 2008, we expect to significantly increase our revenues generated from our electric power equipment business and our wind power business. We have been evaluating working relationships with leading wind energy companies in
In 2008, the Company expects
Use of Non-GAAP Financial Measures
GAAP results for the quarter ended
About China Wind Systems, Inc.
China Wind Systems, through its affiliates, Huayang Dye Machine and Huayang Electrical Power Equipment, manufactures and sells industrial equipment for use in the textile and energy related industries in
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward- looking statements.
-Financial Tables Follow- CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended March 31, 2008 2007 NET REVENUES $8,447,074 $4,129,210 COST OF SALES 6,272,826 3,062,119 GROSS PROFIT 2,174,248 1,067,091 OPERATING EXPENSES: Depreciation and amortization 78,020 71,804 Selling, general and administrative 616,568 106,991 Total Operating Expenses 694,588 178,795 INCOME FROM OPERATIONS 1,479,660 888,296 OTHER INCOME (EXPENSE): Interest income 5,633 101 Interest expense (2,259,694) (8,048) Debt issuance costs (21,429) — Total Other Income (Expense) (2,275,490) (7,947) INCOME (LOSS) BEFORE INCOME TAXES (795,830) 880,349 INCOME TAXES 454,031 298,584 NET INCOME (LOSS) (1,249,861) 581,765 DEEMED PREFERRED DIVIDEND (2,884,062) — NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $(4,133,923) $581,765 COMPREHENSIVE INCOME: NET INCOME (LOSS) $(1,249,861) $581,765 OTHER COMPREHENSIVE INCOME: Unrealized foreign currency translation gain 1,007,245 83,161 COMPREHENSIVE INCOME (LOSS) $(242,616) $664,926 NET INCOME (LOSS) PER COMMON SHARE: Basic $(0.11) $0.02 Diluted $(0.11) $0.02 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 37,484,504 36,577,704 Diluted 37,484,504 36,577,704 CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2008 2007 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $2,580,723 $5,025,434 Accounts receivable, net of allowance for doubtful accounts 3,539,495 2,158,412 Inventories, net of reserve for obsolete inventory 3,171,362 1,929,796 Advances to suppliers 649,745 938,331 Prepaid expenses and other 412,506 378,429 Total Current Assets 10,353,831 10,430,402 PROPERTY AND EQUIPMENT - Net 6,638,714 6,525,986 OTHER ASSETS: Deposit on long-term assets - related party 12,155,472 10,863,706 Intangible assets, net of accumulated amortization 520,682 502,634 Investment in cost method investee — 34,181 Due from related parties 46,561 139,524 Total Assets $29,715,260 $28,496,433 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable $996,839 $820,333 Convertible debt, net of discount on debt — 3,261,339 Accounts payable 688,576 1,845,769 Accrued expenses 191,307 198,542 VAT and service taxes payable 516,940 434,839 Advances from customers 91,613 77,357 Due to related party — 98,541 Income taxes payable 463,955 508,407 Total Current Liabilities 2,949,230 7,245,127 STOCKHOLDERS' EQUITY: Series A convertible preferred ($0.001 par value; 60,000,000 shares authorized; 14,787,135 and 0 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively) 14,787 — Common stock ($0.001 par value; 150,000,000 shares authorized; 37,732,295 and 36,577,704 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively) 37,733 37,385 Additional paid-in capital 12,115,163 3,488,896 Retained earnings 11,874,576 16,074,270 Statutory reserve 371,243 305,472 Other comprehensive gain - cumulative foreign currency translation adjustment 2,352,528 1,345,283 Total Stockholders' Equity 26,766,030 21,251,306 Total Liabilities and Stockholders' Equity $29,715,260 $28,496,433 CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(1,249,861) $581,765 Adjustments to reconcile net income (loss) from operations to net cash provided by (used in) operating activities: Depreciation and amortization 161,846 148,861 Amortization of debt discount to interest expense 2,263,661 — Amortization of debt offering costs 21,429 — Stock based compensation expense 45,000 — Changes in assets and liabilities: Accounts receivable (1,263,740) (1,818,385) Inventories (1,136,507) 806,749 Prepaid and other current assets (49,696) 42,988 Advanced to suppliers 320,583 2,173 Accounts payable (1,225,962) 487,098 Accrued expenses 7,150 47,042 VAT and service taxes payable 62,655 287,500 Income taxes payable (64,183) 275,060 Advances from customers 10,804 380,041 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,096,821) 1,240,892 CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in due from related parties 96,650 (1,009) Proceeds from sale of cost-method investee 34,840 — Deposit on long-term assets - related party (822,212) (316,319) Purchase of property and equipment (3,907) (3,337) NET CASH USED IN INVESTING ACTIVITIES (694,629) (320,665) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments on) loans payable 139,360 386,033 Proceeds from exercise of warrants 187,340 — Proceeds from (payments on) related party advances (100,441) — NET CASH PROVIDED BY FINANCING ACTIVITIES 226,259 386,033 EFFECT OF EXCHANGE RATE ON CASH 120,480 9,311 NET INCREASE (DECREASE) IN CASH (2,444,711) 1,315,571 CASH - beginning of year 5,025,434 421,390 CASH - end of period $2,580,723 $1,736,961 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $16,752 $8,048 Income taxes $518,214 $1,345 NON-CASH INVESTING AND FINANCING ACTIVITIES: Deemed preferred dividend reflected in paid-in capital $2,884,062 $— Convertible debt converted to series A preferred stock $5,525,000 $— CHINA WIND SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS AND DILUTED EPS For the Quarter Ended March 31, 2008 2007 Net Diluted Net Diluted Income EPS Income EPS Adjusted Amount of Net Income available to Common Shareholders $1,031,262 $0.03 $581,765 $0.02 Adjustment Interest expenses related to amortization of conversion of convertible debt to common stock (1) (2,259,694) (0.06) — — Amortization of debt issuance costs (2) (21,429) Deemed preferred dividend (3) (2,884,062) (0.08) Amount per consolidated statement of operations $(4,133,923) $(0.11) $581,765 $0.02 (1) One-time, non-cash interest expenses related to amortization of debt discount to interest expense, Q1 2008 (2) Amortization related to debt issuance (3) One-time non-cash deemed preferred dividend related to issuance of stock warrants upon conversion of convertible debt to series A preferred stock Weighted average diluted shares, 37,484,504 for Q1 2008 and 36,577,704 for Q1 2007 For more information, please contact: CCG Elite Investor Relations Mr. Crocker Coulson, President Phone: +1-646-213-1915 (New York) Email: crocker.coulson@ccgir.com URL: http://www.ccgelite.com
SOURCE China Wind Systems, Inc.
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